Page 365 - Microsoft Word - 00 BA3 IW Prelims STUDENT.docx

Answers to questions

Example 3

Required:

Use the following information relating to an individual non-current asset
to calculate depreciation using reducing-balance method.

Cost at the start of year 1 $10,000

Reducing balance % 20% per year

Estimated residual value $0

Example 3: Solution

This would be presented in the annual financial statements as follows:

Year Cost $ Acc Dep $ SOFP CV SP/L Dep’n Exp

Year 1 10,000 2,000 8,000 2,000

Year 2 10,000 3,600 6,400 1,600

Year 3 10,000 4,880 5,120 1,280

Year 4 10,000 5,904 4,096 1,024

Year 5 10,000 6,723 3,277 819

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